Quote from Laissez Faire:
My wife says the same thing
A fixed stop is infinitely more random than a stop based on evolving market conditions and volatility.
Do you use a fixed profit target as well?
My stops are deliberate (fixed), my entries are deliberate (has cause), but my entries also adapt to the direction of PA, stops do notâ¦. And no I do not use a fixed profit target - PA dictates the target(s)
Volatility â I may have entered, and exited for a profit, or a loss â by the time another figures out their variable stop
Which bodes this questionâ¦
How do we ever know what volatility will be, so we can determine the appropriate random stop before hand
You psychic
I could imagine that it could work for a trader that only trades a very specific setup. A scalper approach.
But for a dynamic trader, one surely has to be dynamic in stop placement as well?
I do not scalp, most of the time⦠(although sometime I gota get out of dodge cause things changed)
How about explaining why a âdynamicâ trader, needs a âdynamicâ stopâ¦.
What exactly tells you this trade requires a .05 cent stop⦠and that trade will require a .20 cent stop
Like I said my entries are deliberate (have cause), but evolve as price evolvesâ¦, my stops are set in concrete so I know exactly how much each trade could cost me..
Do you use the same stop during a financial crisis as you would during a slow summer holiday?
Do you use the same stop on a breakout trade as you would trend trade?
During the crisis is precisely when I could think of no better tool for a beginner, or me, to have - a set stop loss
We would know exactly how much each trade could cost (although slippage was higher than normal during that period)
Price was moving really fast at times, and the last thing a trader needed to be thinking about was how much they âcouldâ lose â I knew â within a few pennies
My mind, my fingers, and my actions were not nearly quick enough to keep up with the market when it was moving lighting fast â less to think about the better â then and now.
Yes â but remember I have two from which to choose
B/Oâs are born from a range, trends are defined by one
I know that there are many times I anticipate a certain action, but I know that a 1 point move against me would negate that action. An example would be a breakout trade. It simply does not make sense to wait for a fixed 2,5 point to get hit just for the sake of the stop getting hit.
Other times, I know that I may have been a little early when I entered around a swing high or low. Here, I would give the market the opportunity to retrace some before it proves me wrong. Thus, a wider stop may be allowed.
Another example would be if I anticipate fast momentum and the market simply falls asleep around my entry. No way I`m going for lunch with a 2,5 point stop in the hope that something happens. Exit ASAP and re-evaluate. I was wrong.
The risk is of course defined in advance and controlled by the number of contracts or shares that are traded. Attached is an example of how this could work risking 2,5% per trade on a $15 000 account.
With this approach, the idea is to increase/decrease size as the account increase/decrease in order to ensure a fixed percentage risk per trade.
Personally, I would be looking to decrease my risk per trade as my account grows (hopefully), but that`s hardly relevant for the question at hand.
Day trading account should make capitalâ¦, swing and investment accounts should make wealth â but that is a whole other discussion
I`m curious, Redneck. What instrument do you trade and what is your fixed stop? Target?
I typically day trade one of these four - LVS, RIMM, AIG, POT
Not going to discuss my stops any more than I already have â took too long to find the optimal settingsâ¦
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Like I said; profit target is what PA dictates â and identifying targets is not that hard
Price does whatâ¦, trends, then rangesâ¦, trends, then ranges
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Hereâs the bottom line, I provided my reasoning because BL wanted to discuss
There are as many ways to trade as there are traders
Heâs trying to find his way, why not give him some âspecificsâ so he can evaluate them and make a semi informed decision
Heâll still need to trial and error it/ them to see if he can create a working approach
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I would also ask you address this please;
How about explaining why a âdynamicâ trader, needs a âdynamicâ stopâ¦.
What exactly tells you this trade will require a .05 cent stop⦠and that trade will require a .20 cent stop
Thanks
RN
